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Sierra Wireless Reports Third Quarter 2016 Results

VANCOUVER, British Columbia--(BUSINESS WIRE)--Sierra Wireless, Inc. (NASDAQ: SWIR) (TSX: SW) today reported results for its third quarter ending September 30, 2016. All results are reported in U.S. dollars and are prepared in accordance with United States generally accepted accounting principles (GAAP), except as otherwise indicated below.

Revenue for the third quarter of 2016 was $153.6 million, a decrease of 0.7% compared to $154.6 million in the third quarter of 2015. Revenue from OEM Solutions was $127.8 million in the third quarter of 2016, down 2.2% compared to $130.7 million in the third quarter of 2015. Revenue from Enterprise Solutions was $18.9 million in the third quarter of 2016, up 6.8% compared to $17.7 million in the third quarter of 2015. Revenue from Cloud and Connectivity Services was $6.9 million in the third quarter of 2016, up 10.7% compared to $6.2 million in the third quarter of 2015. Gross margin in the third quarter of 2016 was 32.1%, compared to 31.7% in the same period of 2015.

“In the third quarter of 2016, we delivered financial results that were in line with our expectations, while also strengthening our strategic position with new product launches, new design wins and the acquisition of Bluetooth innovator, Blue Creation,” said Jason Cohenour, President and CEO. “Looking forward, we expect stronger financial results in the fourth quarter, including sequential and year-over-year revenue growth.”

GAAP RESULTS

Gross margin was $49.4 million, or 32.1% of revenue, in the third quarter of 2016, compared to $49.0 million, or 31.7% of revenue, in the third quarter of 2015.

Operating expenses were $49.4 million and loss from operations was $0.1 million in the third quarter of 2016, compared to operating expenses of $44.8 million and earnings from operations of $4.2 million in the third quarter of 2015.

Net loss was $1.8 million, or $0.06 per share, in the third quarter of 2016, compared to net earnings of $3.3 million, or $0.10 per share, in the third quarter of 2015.

Cash and cash equivalents at the end of the third quarter of 2016 were $112.0 million, representing an increase of $13.6 million compared to the end of the second quarter of 2016. Cash generated from operations during the third quarter was $24.4 million.

NON-GAAP RESULTS

Gross margin was 32.2% in the third quarter of 2016, compared to 31.8% in the third quarter of 2015.

Operating expenses were $43.2 million and earnings from operations were $6.3 million in the third quarter of 2016, compared to operating expenses of $39.7 million and earnings from operations of $9.5 million in the third quarter of 2015.

Net earnings were $4.1 million, or $0.13 per share, in the third quarter of 2016, compared to net earnings of $7.4 million, or $0.23 per share, in the third quarter of 2015.

Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") were $9.7 million in the third quarter of 2016, compared to $12.1 million in the third quarter of 2015.

Acquisition of Blue Creation

On November 2, 2016, we completed the acquisition of all of the outstanding shares of the parent company and sole owner of Blue Creation for total cash consideration of approximately $6.5 million ($3.0 million, net of approximately $3.5 million of cash acquired), subject to working capital adjustments, plus a maximum contingent consideration of $0.5 million under a performance-based earnout formula. Based in the United Kingdom, Blue Creation specializes in Bluetooth, Bluetooth Low Energy, Wi-Fi and other embedded wireless technologies. The company's products include embedded modules and software protocol stacks which are complementary to our OEM Solutions portfolio. We believe that the acquisition of Blue Creation provides us with expanded short-range wireless capabilities in Bluetooth and Wi-Fi and will strengthen our strategic position with OEMs. The Blue Creation business will be integrated with our OEM Solutions business unit. In the short term, we expect the financial impact of adding Blue Creation to be minimal.

Financial Guidance

For the fourth quarter of 2016, we expect revenue to be in the range of $157 million to $166 million and non-GAAP earnings per share to be in the range of $0.13 to $0.19.

This Non-GAAP guidance reflects current business indicators and expectations. Inherent in this guidance are risk factors that are described in greater detail in our regulatory filings. Our actual results could differ materially from those presented above. All figures are approximations based on management's current beliefs and assumptions.

Non-GAAP Financial Measures

We disclose non-GAAP financial measures as we believe they provide useful information on actual operating performance and assist in comparisons from one period to another. Readers are cautioned that non-GAAP financial measures do not have any standardized meaning prescribed by U.S. GAAP and therefore may not be comparable to similar measures presented by other companies.

We use the above-noted non-GAAP financial measures for planning purposes and to allow us to assess the performance of our business before including the impacts of the items noted above as they affect the comparability of our financial results. These non-GAAP measures are reviewed regularly by management and the Board of Directors as part of the ongoing internal assessment of our operating performance. We also use non-GAAP earnings from operations as one component in determining short-term incentive compensation for management employees.

Adjusted EBITDA is defined as net earnings (loss) plus stock-based compensation expense and related social taxes, acquisition-related and integration costs, restructuring cost, impairment, other nonrecurring costs, amortization, foreign exchange gains or losses on translation of certain balance sheet accounts, interest and income tax expense. Adjusted EBITDA is a metric used by investors and analysts for valuation purposes and we believe that it is an important indicator of our operating performance and our ability to generate liquidity through operating cash flow that will fund future working capital needs and fund future capital expenditures.

Conference call and webcast details

Sierra Wireless President and CEO, Jason Cohenour, and CFO, David McLennan, will host a conference call and webcast with analysts and investors to review the results on Thursday, November 3, 2016, at 6:00 PM Eastern Time (3:00 PM PT). A live slide presentation will be available for viewing during the call from the link provided below.

To participate in this conference call, please dial the following number approximately ten minutes prior to the start of the call:

Toll-free (Canada and US): 1-877-201-0168

Alternate number: 1-647-788-4901

Conference ID: 70508861

To access the webcast, please follow the link below:

If the above link does not work, please copy and paste the following URL into your browser: